2 APRIL CHINA COMMUNICATIONS CHINA SERVICES CORPORATION LIMITED STOCK CODE: 552

Transcription

1 2 APRIL CHINA COMMUNICATIONS CHINA SERVICES CORPORATION LIMITED STOCK CODE: 552 1

2 MANAGEMENT Mr. Li Ping Chairman Mr. Zhang Zhiyong President Mr. Yuan Jianxing Executive Vice President & CFO 2

3 AGENDA Overview Business Review Financial Results 3

4 OVERVIEW 4

5 HIGHLIGHTS Rapid revenue & profit growth, further solidified financial position Implemented CTW 1 program and captured opportunities from operators CAPEX hike Successfully acquired and integrated CITCC 2 with emerging synergies Achieved initial success in overseas market expansion (1) CTW refers to CDMA, TD-SCDMA, W-CDMA and their subsequent technologies (2) CITCC: China International Telecommunications Construction Corporation 5

6 OVERALL PERFORMANCE Revenue, gross profit & net profit maintained double-digit growth (RMB M,except % figures) Change Revenue 23,538 32, % Gross profit 4,065 5, % Net profit 1,167 1, % Debt to capitalization ratio 21.1% 14.0% -7.1p.p Note: The results of CITCC have been included into our Group since the completion of the acquisition on 30 May

7 EFFECTIVELY IMPLEMENTED CUSTOMER-FOCUSED STRATEGY Revenues from operators,government & corporate customers increased remarkably Revenue from 3 Major Operators Customer Mix 14, % 21, % 49.0% % Revenue from Government, Corporate & Other Customers 8, % 10, % 17.8% 49.0% 2008 China Telecom China Mobile & China Unicom Government, Corporate & Other Customers 7

8 IMPLEMENTED CTW PROGRAM Captured opportunities from operators CAPEX hike Revenue from 3 Major Operators Establish dedicated support teams (with firewall) for China Mobile, China Unicom and China Telecom 13,714 Focus on businesses in network construction, maintenance & optimization, sales of handsets, logistics & IT applications, etc. 6,491 8,493 7,982 Leverage on neutral, professional and integrated service capabilities to solidify market share 1H2007 2H2007 1H2008 2H2008 8

9 CITCC Successfully acquired and integrated CITCC with emerging synergies Customer Mix of CITCC Completed the placement of 327 million new H shares in April 2008 with net proceeds of HK$1,668 million, part of proceeds was utilized for consideration of CITCC acquisition Revenue and net profit contributed by CITCC amounted to RMB1,690 million & RMB 41 million respectively 1, drove revenue and net profit growth of the Group by 7.1pp & 3.6pp 41.7% 9.4% 48.9% Provided significant complementary benefits in customer diversification and market expansion in overseas and northern provinces in PRC Accumulated experience for the Group s external growth strategy China Telecom China Mobile & China Unicom Government, Corporate & Other Customers (including Overseas Customers) (1) The results of CITCC have been included into our Group since the completion of the acquisition on 30 May Note: The above is June to December 2008 figures 9

10 OVERSEAS MARKET EXPANSION Achieved initial success Started projects as principal contractor in regions such as Africa Revenue from overseas up by >50% Allocate resources of the whole Group. Undertake projects as principal contractor and subcontractor, focus on markets in Africa, Middle East, Latin America, Hong Kong/Macau and Southeast Asia 10

11 DIVIDEND The board of directors recommended a final dividend of RMB per share for 2008, representing a payout ratio of 40% Dividend per share (RMB) Proper balance between shareholders cash return requirement and future investment needs for the Company s long term sustainable development

12 OPPORTUNITIES & CHALLENGES Opportunities Increasing CAPEX and outsourcing of non-core businesses by operators after the industry restructuring and 3G licensing Increasing spending by government on infrastructure and informatization Great opportunities in telecom network supporting system, value-added business and Internet business Regions such as Africa and Middle East are still in the developing stage of telecom network construction Challenges Economy downturn may affect domestic telecom industry and lead to further pressure on our pricing and profitability Competitiveness, service capability & branding in some of our services need further enhancement Our business model need continuous optimization for sustainable growth 12

13 PROSPECTS Customer-focused Strategy Overseas Development Strategy Neutral & Professional Service Provider for Telecom, Media & Technology Companies Innovative & External Growth Strategy Human Resources Strategy Excellent Service Excellent Team Excellent Management 13

14 BUSINESS REVIEW 14

15 REVENUE BREAKDOWN Change % of revenue TIS 11,093 15, % 47.2% Design 2,436 3, % 9.8% Construction 8,071 11, % 34.8% Supervision % 2.6% BPO 9,365 13, % 40.9% Maintenance 1,573 2, % 7.2% Distribution 6,097 8, % 27.7% Facility Management 1,695 1, % 6.0% ACO 3,080 3, % 11.9% IT Applications 1,546 1, % 6.2% Internet Services % 1.1% Voice VAS % 1.8% Others % 2.8% Total 23,538 32, % 100.0% 15

16 REVENUE GROWTH DRIVERS Rapid growth in all businesses, TIS growth accelerated Revenue Growth 23, % 41.9 % 25.1 % 37.9 % 4,237 Revenue Growth Contributions 3, ,471 Revenue Growth Excluding CITCC 23, % 30, TIS BPO ACO

17 TIS BUSINESSES (RMB B) Change Design 2, % 3,167 CAPEX in PRC telecom industry* % TIS revenue from 3 major operators % Construction 8, % 11,316 TIS revenue from government, corporate & other customers *Figures from MIIT % Supervision % 847 Captured opportunities from the operators CAPEX increase, and provided integrated services of planning, design, construction and supervision Participated in communications system construction related to infrastructure projects like highway, subway, airport, harbour and stadium etc. 17

18 BPO BUSINESSES Fully utilize our integrated service advantage Increase in operators network capacity and outsourcing scale, driving rapid growth of maintenance business Maintenance 1, % 2,350 Closely cooperate with operators and equipment vendors to provide distribution services, enhancing customer loyalty Distribution 6, % 8,985 Actively develop nonoperator market and expand geographic coverage, leading to favourable growth of facility management business Facility Management 1, % 1,953 18

19 DISTRIBUTION SERVICE Sustainable healthy development Revenue Composition 4,226 4,250 4,735 12% 10% 11% 67% 1,871 Sales of telecom machineries, mobile & PHS handsets Logistics & procurement agency services Telecom agency services Others 1H2007 2H2007 1H2008 2H2008 Note: The above is 2008 figures 19

20 ACO BUSINESSES Revenue Development Strategy 25.1% 3, , ,998 1,546 Build reputable brands through various cooperation with partners to enhance our products offering & services capabilities Expand our market share in OSS, BSS & MSS businesses to operators Undertake call centre outsourcing service from operators and government and corporate customers Develop value added business for operators on wireline, wireless and integrated services IT Applications Voice VAS Internet Services Others OSS: Operation Support System ; BSS: Business Support System; MSS: Management Support System 20

21 BUSINESS DEVELOPMENT STRATEGIES CTW Program Fully support the network construction and business development of operators Focus on network construction and maintenance, subscriber development, value added business, formation of distribution channel and sale of handsets E Program Work with operators and equipment vendors to focus on informatization projects of government and corporates Capture opportunities from the government stimulation plan and cooperate with infrastructure companies to undertake communication related construction projects Enhance Operational Efficiency I Program Actively undertake overseas telecom infrastructure projects as principal contractor Endevour to significantly increase the proportion of overseas revenue to our total revenues Innovative ACO Development Model Target to have breakthrough on cooperation with strategic partners Enhance our core capabilities & branding 21

22 FINANCIAL RESULTS 22

23 FINANCIAL PERFORMANCE Change % of revenue Revenue 23,538 32, % % Cost of Revenue 19,473 27, % 83.7 % Direct personnel 4,557 5, % 18.2 % Subcontracting 4,577 6, % 21.5 % Materials 7,632 10, % 33.4 % D&A % 1.0 % Others 2,402 3, % 9.6 % Gross Profit 4,065 5, % 16.3 % SG&A 2,795 3, % 11.9 % Net Financing Income/(Expense) 42 (78) N/A N/A Net Profit 1,167 1, % 4.1 % EPS(RMB) % N/A 23

24 PERSONNEL COST Personnel Cost HR Strategy 25.6% 6,032 1,475 4, % 24.6% 7,989 2,068 5,921 Attract, retain and train talents specialized in 3G & overseas businesses according to our business development needs Control total headcount and optimize HR structure Strengthen training to management and key staff on leadership and execution capability Optimize performance-based remuneration mechanism to enable our staff to reap the fruits from our development Staff cost in SG&A as a % of total revenue Direct personnel 24

25 MATERIAL COST Cost of Telecommunications Products Revenue of Distribution Revenue Service of Distribution Service Cost of Construction Materials Revenue of Construction Service 40.2% 11, % 7, % 8,985 8,071 4,944 6, % 3,525 2,688 Notes: Material costs comprise the cost of telecommunications products and construction materials 25

26 SUBCONTRACTING COST Rapid business growth drove higher subcontracting demand Control Initiatives Subcontract certain low-end tasks to control fixed cost Establish mechanism on eligible subcontractor selection 4,577 Subcontracting Cost 52.2% 6,966 Utilize IT system to standardize management process Through audit review and assessment to strengthen subcontracting control 26

27 GROSS PROFIT Gross profit margin still facing pressure Gross Profit GP Margin 30.4 % 5, % 16.7% 15.7% 16.7% 4, % 16.3% 2007 GP Margin H2007 2H2007 1H2008 2H

28 FINANCIAL POSITION CAPEX Free cash flow 1,025 1,271 Account receivable turnover days (RMB M, except % figures) Total assets 21,840 27,459 Cash & cash equivalents 6,632 8,415 Total liabilities 12,202 15,347 Total debt 2,561 1,954 Total liabilities/total assets 55.9% 55.9% Debt to capitalization ratio 21.1% 14.0% 28

29 ENHANCE SHAREHOLDERS VALUE Through budgeting and performance appraisal to optimize resources allocation Actively progress centralized cash management to enhance efficiency of funding arrangement Enhance Shareholders Value Strengthen cost control to enhance profitability Establish sound internal control mechanism to identify and manage key risks Optimize EMOSS system to enhance operation efficiency, and timely response to customers 29

30 Thank You 30

31 FORWARD-LOOKING STATEMENTS This presentation and the presentation materials distributed herewith include "forward-looking statements". All statements, other than statements of historical facts, that address activities, events or developments that China Communications Services Corporation Limited ("China Communications Services") expects or anticipates will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. China Communications Services' actual results or developments in the futures, including those of the businesses that China Communications Services may acquire, may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the level of demand for telecommunications services; competitive forces in more liberalized markets; the effects of tariff reduction initiatives; changes in the regulatory policies and other risks and factors beyond China Communications Services control. In addition, China Communications Services makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements. 31